Remodeling Your Home: Is It Worth the Cost?

The renovations that recoup the greatest percentage of their initial cost are those that residents are likely to use frequently or that enhance energy efficiency.

With home values nationwide still well below the historic average highs set five years ago, many homeowners are considering making improvements to their homes rather than trading up for a bigger, better model.

Remodeling magazine conducts an annual Cost vs. Value Report that presents the national midrange cost for a variety of renovation projects and the typical cost recouped at sale. Note that these numbers are national data, and expenses may vary regionally.

Remodeling Cost vs. Value 2010-2011 1

Project

MidrangeCost

ResaleValue

PercentRecouped

Attic bedroom

$51,428

$37,142

72%

Basement remodel

$64,519

$45,186

70%

Bathroom remodel

$16,634

$10,668

64%

Deck addition (composite materials)

$15,620

$10,337

66%

Deck addition (wood)

$10,973

$9,986

73%

Family room addition

$85,740

$53,624

63%

Home-office remodel

$28,888

$13,235

46%

Kitchen remodel (major)

$58,367

$40,126

69%

Kitchen remodel (minor)

$21,695

$15,790

73%

Master suite addition

$108,090

$68,146

63%

Siding replacement (vinyl)

$11,357

$8,223

72%

Sunroom addition

$75,224

$36,540

49%

Window replacement (vinyl)

$11,066

$7,920

72%

Window replacement (wood)

$12,027

$8,707

72%

Bigger Isn’t Always Better

If you focus on an upscale project with high-end materials or a more budget-conscious approach, the initial cost of the job and the cost recouped at sale will vary accordingly. For example, the difference between a minor kitchen remodel and a major kitchen remodel lies primarily in the design and materials used to renovate a 200-square-foot kitchen. Variables include semi-custom cabinets vs. existing cabinet boxes with new doors and drawers and the presence of a 3-by-5-foot island in the major kitchen remodel.

Ironically, the data show that the minor kitchen remodel recoups a higher percentage of its cost than the major kitchen remodel. Spending your money wisely vs. spending the largest amount of money, may be more worthwhile financially.

The renovations that recoup the greatest percentage of their initial cost are those that residents are likely to use frequently or that enhance energy efficiency. Bathrooms and kitchens, which typically are used daily, tend to be important to potential home buyers. Vinyl siding and window replacement can potentially enhance energy use.

Before embarking on a renovation project, consider whether you are likely to recoup a good portion of the cost over the long term. This approach may help to focus your thinking on long-term value.

July 2011 — This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by D3 Financial Counselors, a local member of FPA.